While supply chain concerns have eased, there are still challenges in getting the supplies you need in a timely manner at an affordable price. This can slow down real estate rehab projects or significantly increase their costs. Either way, it costs you money as investment property renovation takes longer and can leave buildings unoccupied.
It is not unusual for real estate rehab projects to cost as much as 30% more than they did just two years ago due to supply chain price increases.
Supply Chain Disruptions Are Forecast to Continue
Tax and advisory firm KPMG says disruptions to supply chain operations are far from over. The firm expects continued disruptions throughout 2023. Most notably, companies report geopolitical conflicts, continued effects of the pandemic and plant shutdowns, and increasing raw material costs as the biggest threats to supply chains in 2023.
Rising Prices and Lack of Skilled Labor
When contractors were asked about their biggest concerns for 2023, besides the potential of economic slowdown or recession affecting their business, the top two things they chose were rising material costs and an insufficient supply of workers or subcontractors.
Material Prices Continue to Increase
While lumber prices have finally started to decrease, lumber remains well above pre-pandemic levels. At the same time, the December survey of apartment construction and development activity from the National Multifamily Housing Council (NMHC) reports significant increases in other areas. Three-quarters of those responding to the NMHC survey say they were dealing with cost increases and repricing.
Price increases included:
- Exterior roofing and finishes are up 9%
- Electrical components are up 13%
- Appliances are up 9%
- Insulation is up 9%
Gypsum and drywall prices are also continuing to rise. Rates at the end of 2022 were more than 45% higher than in January 2020.
Adding to material costs is the increased cost of transporting goods. While costs declined slightly at the end of 2022, the cost for ocean, rail, and truck transportation remains two to three times higher than in January 2021.
Besides cost increases, companies continue to report delays in getting the materials they need, causing project postponements or increased downtime.
Lack of Skilled Labor
Workforce shortages have hit nearly every industry. Eighty percent of contractors report having difficulty finding workers. As the workforce has aged, many experienced workers are retiring, leading to a significant shortfall. This has increased costs for skilled workers and decreased availability.
The Associated Builders and Contractors (ABC) reports that the construction industry currently needs 650,000 more workers to meet demand on top of the normal pace of hiring, making it even more challenging to find and retain high-quality workers.
The Charter Construction Group Advantage
Working with a national investment property renovation and remodeling company like Charter Construction Group provides significant advantages for managing real estate rehab projects and dealing with supply chain issues.
Access to Materials
Because Charter Construction Group manages multiple projects throughout the country, it can divert materials and appliances from one project to another to meet deadlines. The company also has deep nationwide contacts and flexibility, allowing for rapid response when supply chain problems arise.
Access to Labor
In addition to rising costs, many real estate rehab projects are taking longer because of scheduling projects with available workers. Charter Construction Group has partnerships with local subcontractors all over the country. Because of the volume of business provided, this provides greater access to high-quality workers, resulting in faster rental property turnover and real estate rehab completion.
Partnering with Charter Construction Group means you do not have to worry about sourcing and securing skilled labor. Charter Construction Group has existing partnerships in place with high-quality workers and subcontractors. As a general contractor, Charter Construction Group also manages the labor pool, so you don’t have to.
Because Charter Construction Group buys in bulk for nationwide investment property renovation projects, it has better access to materials and saves on costs, which are passed on to clients.
Specializing in Real Estate Rehab at Scale
Charter Construction Group specializes in real estate-owned properties for REITs, asset management firms, brokers, investors, and property management companies nationwide. The expert team at Charter Construction Group knows what it takes to handle investment property renovation quickly, efficiently, and at scale.
Charter Construction Group provides a variety of services to keep your property rental-ready, including:
- Procurement of materials and labor.
- Home repairs and remodels — big or small.
- Remediation services for fire, water damage, mold, or asbestos.
- Rental property turnover.
- Pre-market cleaning.
- Trash and debris removal.
- And more.
You can trust Charter Construction Group to handle all of your real estate rehab needs. Contact Charter Construction Group today for a free consultation.